Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector

May 1, 2009

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Marcos R Souto, and Rodolphe Blavy. Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector, (USA: International Monetary Fund, 2009) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The credit risk measures we develop in this paper are used to investigate macrofinancial linkages in the Mexican banking system. Domestic and external macro-financial variables are found to be closely associated with banking soundness. At the aggregate level, high external volatility and domestic interest rates are associated with higher expected default probability. Though results vary substantially across individual banks, domestic activity and U.S. growth, and higher asset prices, are generally associated with lower credit risks, while increased volatility worsens credit risks. The expected default probability is also found to be a leading indicator of traditional financial stability indicators.

Subject: Bank soundness, Banking, Commercial banks, Credit risk, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Financial statements, Nonperforming loans, Public financial management (PFM)

Keywords: Asset, Asset volatility, Balance sheet datum, Bank, Bank soundness, Bank vulnerability, Banking sector, Banking sector soundness, Banking system, Book value, Book value asset volatility, Book value risk indicator, Commercial banks, Credit risk, Credit risk indicator, Downside-risk volatility, Financial statements, Global, Macrofinancial links, Medium-size bank, Mexico, Nonperforming loans, Risk measure, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/109
Stock No:

WPIEA2009109
ISBN:

9781451872569
ISSN:

1018-5941

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